Alcoa disappoints

Alcoa (AA), Dow stock, reported a smaller net loss for Q4 & revenue shrank as higher metal prices were offset by ongoing weakness in aerospace, construction & gas turbines businesses. AA had a net loss of 28¢ per share compared with a loss $1.49 per share last year. But the quarter included 28¢ a share in special charges. Revenue fell to $5.4B from $5.6B. However, free cash flow turned positive for the first time since Q2 of 2008. AA expects key markets to improve in 2010 but they are not at historical normal levels. This is a discouraging sign for other Q4 earnings reports. In after hours trading, the stock sold off 90¢ (5%) as EPS came in below the 6¢ analysts had been looking for.

•Alcoa's Quarterly Profit Trails Estimates on Higher Energy, Currency Costs


Alcoa --- 1 year





On another negative note, Japan Air Lines, a major international air carrier, has been given clearance to file for chapter II next week (an expected move). While this won't directly impact US markets, its bad debts & borrowings will hurt many around the world. Their stock in Tokyo is trading at the equivalent of 70¢. Asian markets (including Japan) are opening slightly higher but expect US markets to be weak at the open tomorrow.

Stocks remain undecided

After a soggy start which took the Dow below 8000, buyers returned in the PM. Banks led the rally. However, the 2 oils, Chevron (CVX) & Exxon Mobil (XOM), were down about 1½ each along with a similar loss at Boeing (BA). Dow broke into the black at day's end but couldn't hold those gains into the close. Dow fell 25, advancers over decliners 3-2 & NAZ was about even.

Banks had another excellent day anticipating great earnings reports. Earnings & assets (bad loans) should be the major focus, but the markets are only looking at earnings. Banks are able to lend with a cost of funds near zero. If they can't earn money now, they never will be able to. But bad loans aren't going away anytime soon. The index has had a major climb from its 81 low in early Mar. To give a flavor of how much banks have come back, Bank of America (BAC) now has a handle of 11 (with a 4¢ div).


S&P 500 FINANCIALS INDEX

Value 150.18

Change 6.89

% Change 4.8%

Despite lower oil prices on a gloomy outlook for oil, the Alerian MLP Index rose 2.72 to 201+, bringing it above the 190-200 trading range where it has spent much of this year. Buyers have been coming back to MLPs in recent days:


Alerian MLP Index --- 2 weeks




Thanks to buying in the PM, the Dow Jones REIT index broke into the black, up almost 1. Junk bond funds had a mixed day & VIX rose 1.

Oil had a very bad day. International Energy Agency (IEA) said demand in 2009 could be the lowest in 5 years with factories shutting & car sales tumbling in a deepening global recession. They are forecasting oil demand in 2009 could fall 2.4M barrels to 83.4M barrels (equivalent to Iraq's production).

CLK09.NYM

..Crude Oil May 09

..49.95

.. 2.29 ......(4.4%)

Crude Oil Falls After IEA Cuts Demand Forecast to Five-Year Low


Lost in the news here, Thailand is going thru a major political upheaval. Keep an eye on that story, Asian markets are.

Markets have been trading in sideways for much of the last 2 weeks. This PM Dow managed to close above 8K, at 8057. It looks like banks will give improved earnings & that could bring more buyers back to the markets (boosting the Dow). But all is not well. Banks still have a ton of bad loans to deal with. Quietly, General Motors (GM), still a Dow stock, has been sinking on growing worries about the ticking time bomb they are sitting on. The gov of Mich hinted at lunch that GM would have an "electric car" announcement tomorrow. They'll need more than that.


Dow Jones Industrials --- 2 weeks




General Motors --- 2 weeks

Nervous markets give back recent gains

Stocks are overbought, showing fatigue after a run up in the last month. Traders are becoming increasingly worried about earnings reports coming in the next few weeks. Today, Dow dropped 186 bringing it back to Mar 25 level, decliners over advancers almost 4-1 & NAZ fell 45.

S&P 500 FINANCIALS INDEX fell back 4 to 122, the middle of its range in the last 2 months & above the 82 low set a month ago. The Index has been trading sideways despite a major effort last month by banking execs to spread favorable stories about their businesses bottoming. It began 2009 at 169.

After hours Aloca (AA) reported a loss per share of 59¢ vs an average estimate of 56¢, their 2nd consecutive quarterly loss. The stock was down 12¢ during trading hours & lost another 28¢ after the loss announcement. AA recently announced raising $1B in capital thru the sale of stock & debt, slashed the div, cut capital expenditures & is laying off 13% of its workers. They are experiencing lower demand from key customers such as car makers, construction & airplane industry. AA stock is selling at a 25 year low. While much of this may already be factored into the markets, this is a kick in the head markets won't appreciate.

Alcoa reports $497M loss in 1Q on lower prices- AP


AA news is already hurting stocks. Asian market such as Shanghai, Tokyo & Hong Kong are selling off on greater worries about the global recession worsening.

•Asian Stocks Fall for Second Day on Renewed Profit Concern; Alumina Drops

Stocks start spring strong

The recession is over. That was the thinking that propelled stocks upward yesterday. It continued on in Asian & European markets which had strong rallies, bringing even more buyers in the US today. Less bad economic news yesterday signaled (to buyers) that the economy is bottoming & the upswing will begin very soon. Dow rose 231, advancers over decliners 8-1 & NAZ was up 56. The only decliners in the Dow were the drug related: Johnson & Johnson (JNJ), Merck (MRK) & Pfizer (PFE).


Banks joined in (or led, depending on your perspective) the rally. The S&P 500 FINANCIALS INDEX is up but is still shooting to go over the 138 peak reach on Jan 28.

Value 126.91

Change 4.82

% Change 3.9%

Everybody's a winner today. MLPs & REITs are up 2 each, junk bond funds are strong while VIX pulled back 1 to the 41s (low end of its range in 2009).


Oil rose sharply on the euphoria about stronger worldwide economies.

CLK09.NYM

...Crude Oil May 09

....51.87

... 3.48 .......(7.2%)

The weekly jobless statistics were gloomy once again. Last week 669K workers filed new unemployment calims, up 12K form the prior week (which was already an ugly number). The 4 week average, less volatile, is 657K, the highest in 26 years. The number receiving unemployment benefits increased to 5¾M, the 10th consecutive weekly increase to yet another record. An additional 1½M receive extended unemployment benefits under a program passed by Congress last year.

• New jobless claims jump unexpectedly to 669K- AP

With all these layoffs, consumer credit is going from bad to worse. Consumer loan delinquencies keep rising & this year's numbers should worsen:

Q4, 2008....3.2%
Q3, 2008....2.9%
Q4, 2007....2.6%

• Consumer loan delinquencies rise in 4th quarter- AP

The bankruptcy of General Motors (GM), above 2, now is taken for granted in the markets. They've come up with a new term, "surgical bankruptcy." But the terms are just words. This will involve a lot of pain for shareholders, bondholders & workers. A bankruptcy could bring an end to the union as a new GM would be able to hire non union workers at a lower cost to GM. The bigger & stronger suppliers may survive but marginal ones will probably be dragged down with GM. Banks which have become the new financial darlings in the last month will have to write down their auto related loans (auto & supplier companies, auto dealers and employees who are laid off).

•GM Use of Quick Bankruptcy to Survive Likely to Encounter Surprise, Delay


With today's gains, the Dow is pushing on the 8K ceiling. If that resistance gives way, Dow could stay on its winning ways for some time.


Dow Jones Industrials --- YTD

Monday Massacre

Nothing like a double dose of bad news, potential auto bankruptcies & more gloomy thoughts about the bank crisis dragging on, to take markets down. A rally in the last hour reduced losses for the day, allowing the Dow to recoup almost 100 points off its low. But Dow still tumbled 254, decliners over advancers 6-1 & NAZ joined in the decline, down 43.


Prospects of even more bad news on the banking front dragged the S&P 500 FINANCIALS INDEX down sharply:

Value 111.52

Change -11.60

% Change -9.4%

Another banking stock, Citigroup (C), I call it a just a call, has had a wild ride this month. Those who risked playing with fire & bought it near the lows were rewarded nicely. Those who got in a little late found out what can happen when playing with fire. The new Mets ballpark, Citi Field, is opening. It's difficult to believe this has any connection with the Dow stock, Citigroup.


Citigroup ---- 1 month




MLPs, REITs & junk bond funds all participated in today's sell-off. The only winner was the VIX, up 5+.


As promised, the Federal Reserve has been buying Treasury bonds. These purchases help push yields down, but so far there have been no dramatic changes in the yield. The yield on the 10 year Treasury closed at 2.71%, not far from the yields during the last week. However, money managers in this market seem to be responding favorably. They have been selling Treasuries to lock up their gains & using that money to buy mortgages for the higher yields combined with the lack of confidence on further price increases for Treasuries. If true, the FED move is "working" to some degree, the beleaguered building industry would like to see more mortgage money made available.

•Bernanke Buying Treasuries Drives Pimco, TCW to Mortgages, Corporate Bonds


Oil sold off badly on fears of lower demand for oil. Generally this is viewed as a plus for the markets but today it's a solid negative, a sign that the worldwide recession is getting worse.

CLK09.NYM

..Crude Oil May 09

..48.53

.. 3.85 ......(7.4%)

• Oil tumbles below $49 on gloomy economic outlook- AP

Chrysler looks like it will work out an arrangement with Fiat to stay alive. In this world, time is measured in mins, everything is subject to more change. If this goes thru, there will be an enormous amount of pressure on GM to figure out how to stay alive. Bondholders & unions, among others, will have to give up a lot to save what little remains.

• Chrysler agrees on framework of alliance with Fiat- Reuters

GM bondholders are getting ready to swap bonds for stock, largely because they have little to lose, to help preserve GM. Again, the long term is viewed as an hour or 2.

•Obama Says GM, Chrysler Have One Final Chance to Restructure or Lose Aid


Over the weekend, talk by administration officials that the banking crisis is not over, might even get worse, hurt markets. But the gloomy outlook for the 2 autos is center stage & nobody is sure how it will play out. All sides are releasing statements with current news & spin for political effect. One thing is clear, the administration is acting very tough & seems ready & willing to let the 2 auto companies fail for what is called a structured bankruptcy. Asian markets, which open in a few hours, will probably continue the negative theme from Wall Street.

Asian markets

These values (courtesy of Bloomberg) are prior to Asian markets opening on Wed.

The ¥, probably the most important Asian currency, is 98 to the $. In the last few days, it weakened even more to 99, then rallied to mid 90s & now is back at 98. The weaker ¥ is a very important to the Japanese economy, which is in a severe recession, because exports are so crucial.

Oil & gold prices are always important in the world economies. As said in the prior post, it looks like gold is searching for new 2009 highs above 54.

These bond yields may be new to some investors. Australia has the only yield higher than the US (at 2.65%).


CURRENCIES

	VALUE	CHANGE	% CHANGE
USD-JPY	98.1370	0.2755	0.28
USD-HKD	7.7501	0.0000	0.00
USD-SGD	1.5114	-0.0028	-0.18
AUD-USD	0.6982	0.0026	0.37

COMMODITY FUTURES

	VALUE	CHANGE	% CHANGE
Oil	53.60	-0.38	-0.70
Gold	932.00	6.00	0.65
Natural Gas	4.34	-0.00	-0.05

BONDS

	PRICE	YIELD
10-Year Japan	100.36	1.27
10-Year Hong Kong	97.26	1.94
10-Year Singapore	116.67	2.05
10-Year Australia	106.66	4.43

Dow is Down, Down, Down

March got off to a dismal start. Last night, Asian markets began trading, all sharply to the downside. They were following a terrible Fri in NY, not to mention a terrible week. The thought that AIG would need even another bailout hurt markets, especially financials. AIG is an insurer for many financials, letting AIG drift away is not an option. There were many rumors about AIG selling 20% of 2 of its biggest subs as part of the bailout. Also, in Hong Kong, HSBC, another enormous global bank, was proposing a huge rights offering (at 40% below the last price) to shore up their sagging balance sheet. This AM, European markets sold off badly on rumors (among many problems) that eastern European countries might need bailouts. Can you spell "confusion?"

Dow futures were trading down 150 early this AM about where they are now (actually down 211). This takes them solidly below 7K, just another floor that didn't hold. Decliners lead advancers 7-1 & NAZ is down 35


S&P 500 FINANCIALS INDEX is below the record low reached 10 days ago:

Value 94.81

Change -6.34

% Change -6.3%

Dreary news on the largest financials (around the world) just keeps coming. As predicted, AIG announced the biggest corp loss in history - $61.7B for Q4. Guess what, they need another bailout!! One year ago this was a Dow stock selling for $51, with debt rated AAA. Today it's stock is up 6¢ to 48¢. Even though intentions are noble, there is not reason to expect this bailout will more successful than prior ones. Of course one year ago General Electric (GE), Dow stock, Dividend Aristocrat, AAA credit rating, was 35. Today it has a 7 handle, even the AAA seems to be withering away, as it's viewed as just another financial company in deep trouble.

•AIG Gets New Round of Government Aid as Insurer Reports $61.7 Billion Loss


In the financial disarray, all divs & yields are suspect (especially after GE made its div cut official). The Alerian MLP Index dropped 10½ taking it under 180, near its starting point this year. REITs & junk bond funds are weak while VIX shot up 3½ to 50.


Alerian MLP Index --- YTD




Dreary econmic news is even dragging oil & gold down:

CLJ09.NYM

..Crude Oil Apr 09

...40.75

... 4.01 .......(9.0%)

ZGH09.CBT

..Gold 100 oz. Mar 09

...931.50

... 10.00 .......(1.06%)

First the 8K floor held for 4 months. Now the 7K floor held for only 2 weeks. At times, chaos & confusion can bring buying opportunities. Presently it looks like such opportunities are way down the road.

•VIX Premium Shows Bear Market Lasting Two Years in U.S. as Traders `Panic'

Dow Jones Industrials --- YTD

Declining Dow continues in February

January was the worst January in history, the negative trend continues on the first day of trading in February. Asian & European markets sold off & Dow futures this AM were down 100+. Dow plunged 100 at the opening, tried a rally & then pulled back to down 77. In all fairness, it has been giving up ground grudgingly, but giving it up nevertheless. Decliners lead advancers 2-1 & NAZ gained 6. Below is an article explaining today's declining world markets. Nothing new, dismal news just keep coming with no end in sight (at least for the short term):

• World markets fall on poor earnings, banking woes- AP

S&P 500 FINANCIALS INDEX had another terrible month, down 27%, ending near the new low of 108. Today's it's down another 1, two years ago it was at the lofty level above 500. Banks are weak on the expectation that bailout money may come with strings forcing them to lend more.

Dec_31... 169
Jan_31... 124


The MLP index is lower in response to the down markets, down 2 to 199. That 200 floor may return to acting as a ceiling. MLPs were one of the best performing groups in Jan, thanks to a gain. Other high yield securities are mixed today.


Alerian MLP Index --- 2 weeks





The VIX, volatility index, is up 3 to 48 on growing fears & may be headed higher. 6 months ago, 20+ was considered very high & 35 was hard to imagine.


VIX ----- 2 weeks




More glum earnings reports are coming while the senate debates the stimulus package. The Dow hovers not near but under 8K. This may lead to a test of the Nov lows at 7½K.

GDP has biggest shrinkage in 27 years

Dow is down 119, decliners over advancers 3-1 & NAZ is down 23. Grim economic news, highlighted by the GDP report is turning off buyers.

S&P 500 FINANCIALS INDEX continues sliding after yesterday's decline, down 1. The Alerian MLP Index fell 2½ taking it pennies under the 200 floor, dangerous territory for those watching technical indicators. REITs are weak while junk bonds are mixed. VIX, volatility index, is up 1 but in the flattish range where it's been for the last week (low 40s). Oil is slightly higher.


The US economy shrank at its fastest rate since 1982, sinking deeper into a recession. Gross domestic product (GDP), which measures total goods and services output in the U.S., plummeted at a 3.8% annual rate in Q4, after falling at a 0.5% rate in Q3. These were the first consecutive declines in GDP since 1990-91.

•U.S. Economy Shrinks at 3.8% Pace, Most in 26 Years, as Spending Crumbles


Exxon Mobil, a Dow stock & recent addition as an S&P 500 Dividend Aristocrat, earned a record profit for any company, $45B last year. Q4 EPS was down from the prior year, but beat forecasts. The stock was up 89¢. Chevron (CVX), Dow stock & 2nd largest US oil company, also had an excellent report for last year thanks to high oil prices for much of the year. Royal Dutch Shell (RDSA), 2nd largest oil company in the world, reported a loss in Q4, but still achieved record annual profits for a European company. Oil stocks are strong today.

• Exxon Mobil shatters US record for annual profit- AP
• Chevron earnings rise on asset swap gain- Reuters

Caterpillar (CAT), another Dow stock, after reporting dreary earnings along with layoffs, just announced more than 2K additional workers were to be laid off. This brings total layoffs to 20K out of a workforce of more than 110K. I consider CAT as representative of many companies.

• Caterpillar to slash another 2,110 jobs- AP

Asian stock markets have to endure the same problems as in the US. This is their earnings season & they also have dismal reports. Companies we all know, Sony, Toshiba, Toyota, Honda, Canon, Samsung, LG, Lenova, are all reporting the worst numbers in 2 decades (if not the worst in history) resulting in large layoffs. This week, the Shanghai stock market is closed for Chinese New Year.

While still trading in the same trading range, above 8K, Dow is on defense again. But now it's hovering near the 8K floor.

Stocks little changed

Alcoa (AA), a Dow stock, kicked off earnings season last night with a large loss. Asian markets followed by European markets sold off heavily on this disappointing news.

• World markets tumble on US earnings concerns- AP
• Alcoa reports $1.19B loss in 4Q on low prices

US markets are digesting the news. After starting with gains, Dow slipped back to a slight loss, advancers are 25% ahead of decliners & NAZ is up 7. Oil is even but still in the 37's, near the lowest level in years.

MLPs & REITs are up modestly.

Bloomberg has a story about junk bonds finding new friends in recent weeks. After investors sold these funds all year (largely after Sep 15), they have been buying aggressively recently. For example, one of mine is up 50% from its recent lows a month ago. They are betting that extraordinarily high yields more than compensates for the risk of higher defaults.

Junk Debt Signaling Great Depression Defaults Lures TCW


Alcoa's report yesterday was felt the world. Their customers are auto companies, aircraft & construction industries. This was just one more reminder that these prime businesses are hurting badly. However revenues came in ahead of forecasts, but the loss of per share was 1.49. Grrr!! They've paid a div for 60 years but the company's outlook is uncertain raising fears about a large div cut (which will be announced later this week). More pain is coming for AA in Q1. Today AA is down again, to 9.60.

S&P 500 FINANCIALS INDEX is down pennies after a big loss yesterday. Banks keep selling assets to shore up balance sheets. Provisions for loan losses still have to be increased, explaining why they are reluctant to lend. This dreary outlook may sink the index to another new low.

Stocks fade, dragged down by Madoff scandal

Enthusiasm from yesterday's PM rally melted. It started with Asian/Australian markets last night. They rose, but only moderately & that didn't last long. The Honk Kong market ended with a 2% gain, but the others had only modest gains. In particular, they are more sensitive to the dollar & it TANKED on news of the dramatic rate cuts. The Japanese ¥ rose to 88 to the dollar (from 110 just a few months ago) & the € is up to 1.43. The Japanese economy is is export driven & the high rates for the ¥ are not going to help them pull out of a major recession. There is also the thought that the US economy may be in worse shape than thought if the Federal Reserve has to be soooo accommodating.

•Dollar Falls Most Against Euro Since 1999 Debut After Fed's Rate Reduction


Dow is down 80, decliners ahead of advancers 3-2 & NAZ is down 16. Banks are hanging in fairly well, the S&P 500 FINANCIALS INDEX is down only 3. The Alerian MLP Index is down 2, Dow Jones REIT is down 5½ (after yesterday's very strong rally) & Lehman High Yield Bond ETF is down 1%. The weakness today is from negative market sentiment plus we are entering the final days of the year for tax loss selling (trades have to be settled by Dec 31).

OPEC just announced a production cut of 2.2MM barrels per day, the largest cut in their history. Global economic recession outweighs a production cut, oil down 2+.

OPEC Cuts 2.2 Million Barrels a Day- AP

CLF09.NYM

..Crude Oil Jan 09

....40.98

.. 2.62 ......(6.0%)

The VIX, volatility index, pulled back another 1. The 3 month graph shows it has retreated from the astronomical highs, however it still remains extremely high (20 used to be considered a high number):


VIX ---- 3 months





The Madoff scandal drones on, a huge negative for the bulls. This makes it harder to trust advisers about investing, not to mention the investing "for the long term" concept has gotten fuzzy lately.


•Madoff Placed Under House Arrest; Wife Ruth Ordered to Surrender Passport

• SEC chairman says agency failed to probe Madoff- AP
• Connecticut investment firm stung by Madoff ties- AP
• Curfew for Madoff as new condition of bail- AP
• Limited Options for Investors Burned by Madoff- Tech Ticker

The administration is struggling to come up with a plan to save the Big 3, the clock is ticking. I think they will have to announce their idea today or tomorrow

• White House pressured by lawmakers on auto bailout- AP

The final attempt to bailout the Big 3 will get a reaction, already 2 auto suppliers have failed. However, by the next day that news will be history.

Lower markets, awaiting developments

Asian/Australian markets rose sharply last night on expectations of an auto bailout which should help their auto makers & exports in general. US markets don't share that optimism. In nervous markets, Dow is down 62, decliners over advancrs 2-1 & NAZ is down 31. S&P 500 FINANCIALS INDEX dropped on the uncertainty ahead of the expected auto bailout, not to mention the important Federal Reserve meeting announcement tomorrow on interest rate cuts.

Value 156.05

Change -5.48

% Change -3.4%

The Alerian MLP index is flat, the Dow Jones REIT Index dropped 4 & Lehman High Yield Bond (JNK) is up pennies (for no special reason other than the extraordinary high yields) & VIX, volatility index, is up 3 to 57 on increased market nervousness.

Oil rose ahead of the OPEC meeting,. They are calling for a sizable cut, sending oil prices higher (over 50 for a time):

CLF09.NYM

..Crude Oil Jan 09

...48.75

.. 2.47 ......(5.3%)

•Oil Rises to $50 as OPEC's El-Badri Says Sizable Cut Is Needed at Meeting


Output at factories, mines, etc fell 0.6% last month, less than feared but still a solid negative. This is to be be expected during a recession.

•U.S. Industrial Production Falls 0.6% as Automakers Struggle for Survival


The Madoff scandal is growing in seriousness. They are trying to figure out who invested in his schemes & how much. Investors reach to the biggest banks around the world & hedge funds. The numbers involved are huge, nobody is sure where the bleeding will spread.

•Madoff Said to Have Managed Hedge-Fund Money in Unregistered Side Business


With so much up in the air, markets will probably bide their time today away before announcements tomorrow.

Stocks lower, awaiting news on car makers fate

When the Senate announced last night that they would not be able to pass legislation to help the auto companies, Asian markets & Dow futures sank. Asian markets were weak already, but dropped further to losses of 5-6%. Auto companies were hit hard. Toyota, shortly expected to be pronounced the #1 auto company in the world, was down 10%. The auto companies were lower because the auto suppliers are very much tied in with the auto companies. These suppliers which are also threatened, sell parts to Asian car companies. Dow futures were down 250 & sank to minus 330 later.

But today there is a ray of hope, auto companies may yet get help from the administration. The White House is behind the idea of helping the Big 3 & the Treasury is looking for a way to provide help. In the meantime, we have to let them work out details. After falling 170 on the opening, Dow has recovered to a loss of 94, decliners ahead of advancers 3-2 while NAZ is up 4.

•Treasury Says It's Ready to Assist Automakers Until New Congress Convenes


S&P 500 FINANCIALS INDEX is down only pennies, awaiting developments on the auto bailout. Given the fuzzy situation, the Alerian MLP Index is down 1, The Dow Jones REIT Index is up 3 from very depressed levels, Lehman High Yield Bond ETF is down pennies (it always seems to be down pennies at least) & the VIX is up almost 1 to 56½

Oil pulled back, wiping out most of yesterday's gains. Traders are mainly concerned with OPEC's meeting next week.

CLF09.NYM

..Crude Oil Jan 09

...44.72

.. 3.26 ......(6.8%)

In the other news dept, retail sales continues weak. Sales dropped 1.8% in Nov, slightly better than the ugly forecasts being used. But that provided little comfort, as this was the 5th straight month of declines. A terrible month for autos led the way down. Lower gas prices helped, but depressing news about job losses & threats of more losses are weighing down the public.

•U.S. Retail Sales Drop For Fifth Month on Auto Slump, Decline in Gasoline


The index of consumer confidence rose to 59.1 from 55.3 in Nov, but still very close to a multi year low. Lower gas prices provided only limited help when compared to dreary economic news, especially regarding the possible loss of employment.

•Consumer Confidence in U.S. Rises From 28-Year Low as Gasoline Prices Fall

I think the White House will come up with help to keep the auto companies alive. However any such aid will be only temporary. They still face huge major problems which need to be solved if they are to survive.

Early market gains fade fast

Stocks out of the gate started strong following the leads of overseas markets. Asian & European markets rose on news that China adopted a $586B stimulus spending package. Commodity & telecom stocks were strong. Leading gainers in the Dow were Alcoa (AA), AT&T (T), Verizon (VZ) plus McDonalds (MCD) on a 8.2% gain in same-store sales for Oct. Dow is now down 23 (down from a 200 gain early on), advancers equal decliners & NAZ is down 16.

Buyers pulled back on more glum economic news such as Circuit City filing chapter 11, AIG needing even more money for their bailout, Fannie Mae recording a bigger than whopper size loss & GM dropped 1 to 3.39 on predictions it may not have enough cash to last thru next month (their days as a Dow stock are numbered).

•Circuit City Files for Bankruptcy Amid Competition From Best Buy, Wal-Mart
•Fannie Mae Posts Record $29 Billion Quarterly Loss After Asset Writedowns
•AIG Bailout Swells to $150 Billion as Insurer Reports Fourth Straight Loss
•General Motors Plummets After Deutsche Analyst Cuts Price Target to Zero


S&P 500 FINANCIALS INDEX dropped 3, the Alerian MLP Index was even but the Dow Jones REIT Index dropped 7 to 151 (maybe heading for the recent low of 135). The VIX, Volatility index, was up 1½ to 57.60 continuing in astronomical territory.


China's plan for spending is supposed to help the world's economy as they are a big player. They will be spending on infrastructure: roads, bridges, housing & repairing damage form the earthquakes. However, they may be already spending on some of the projects in the plan. China envisions this will take a couple of years to complete. Financing the plan was not addressed. The most directly impacted will be metals. Metals were strong but oil was little changed:

• China says stimulus plan important for world- AP

CLZ08.NYM

Crude Oil Dec 08

....61.46

.... 0.42 ..... (0.7%)

Retailers will be reporting Q3 earnings later in the week, expectations are bleak.

Dow rallies despite 6.5% unemployment rate

Asian markets last night sold off in opening hours following the horrible day in US markets. Australia, Tokyo & Korea were all hit hard. However most rallied by the close of trading. A major news item in Japan was that Tokyo said that they were expecting this to be their worst year in 15 years.

Dow was encouraged & rose 166, advancers over decliners 2-1 & NAZ was up 28 on a greatly oversold rally. The indices I follow were up mildly, while S&P 500 FINANCIALS INDEX was down pennies. Oil was up, again only by pennies. If there is logic behind the rally, it seems to be on the hope of another rate cut (even though banks aren't lending) which trumps the terrible unemployment report

The unemployment report came out & it was ugly. The rate shot up to 6.5% in Oct, versus 6.1% in the prior month & the highest rate since 1994. This is the 10th consecutive month of job declines, 1.2MM jobs lost this year. The outlook is for more rate increases, as everybody is trying to guess how high the rate will go.

•Jobless Rate in U.S. Jumps to 6.5%, Highest Since 1994, as Payrolls Tumble


Ford (F) reported a terrible qtr (GM results should be out shortly) as sales plunged 22% producing a $3B loss (Ford is now a $2 stock). Their biggest problem is the rapid pace at which they are "burning cash" (7.7B in Q3). The auto makers are meeting in DC, trying to come up with a rescue, bailout, whatever package (roughly $50B) so they can ride out the recession. When I hear that about sales plunging, I am reminded of talk about how retail demand dropped off a cliff on Sep 15.


•Ford Has $2.98 Billion Operating Loss, Burns $7.7 Billion Cash in Quarter


Las Vegas Sands Corp. (LVS), plunged 10 in the last week to 6.76, is looking for Asian money (where it has $16B in expansion projects underway) to avoid defaulting on loans.

•Las Vegas Sands Chief Adelson Holds Talks With Singapore, Banks on Funding


Markets are having a good day but the Dow is still down 400 this week after the pounding it took in the last 2 days. Markets remain on defense.

Post election sell-off

Asian stock markets rose last night, encouraged by the US elections. That is a little strange since on the prior night, they talked about Asia liking McCain because of his track record of being for free trade. The Democrats are not strongly for free trade, especially when the US economy is struggling. Next, European stocks sold off on negative economic news.

Dow is down 166, decliners over advancers 2-1 & NAZ is down 34 on after election thoughts. The S&P 500 FINANCIALS INDEX dropped 4 to 217. The Alerian MLP Index is down 3 to 222, the Dow Jones REIT index dropped 6½ to 168 & the VIX (Volatility Index) dropped pennies to 47. If there is good news, lower numbers for the VIX suggest markets are calming down, maybe the Dow will only have daily point swings of 1-200. Junk bond funds have been attracting buyers in the last week, but daily gains are measured in pennies because of their low stock prices. Those 16+% yields are finally pulling in nibblers.

Oil sold off & remains kicking around the 60s.

CLZ08.NYM

Crude Oil Dec 08

....68.17

.... 2.36 (3.4%)

• Oil slides below $68 on weaker demand worries- AP

Macro economic news can't break out of negative thinking. Planned job cuts are shaping up to be the worst in 5 years. The big jobs number comes out on Fri, the only question is how ugly it will be.

• Planned job cuts highest in 5 years- CNNMoney.com

Another big company, Time Warner (TWX), reported slightly lower operating profits on essentially even sales in Q3. Their guidance for 2008 EPS was revised downward by 3¢ which will be felt in Q4. The stock took the news well, up 26¢, but still sells at a depressed $11.

•Time Warner Lowers Earnings Forecast for Year Amid Time Inc. Restructuring


GMAC had an ugly Q3 report, attributable to dreary economic conditions. They may have to become a bank so they can get help from the Federal Reserve.

• GMAC 3Q loss widens, blames economic woes- AP

Now that elections are over & most of the Q4 earnings reports are in, the focus for the stock markets will return to macro economic & company announcements about earnings guidance. On both fronts, they are not expected to get better for some time. Meaningful gov help will not come until 2009.

Early market gains don't last

Last night was an exciting time for Asian markets. They put in their 3rd straight day of rising markets with the biggest 3 day gains ever. However, this is coming off huge bear market lows, most were down 60% from their peaks a year ago (Shanghai was down 70%). They were encouraged by the greatly oversold markets & local bank rate cuts. The Hong Kong central bank cut their base rate & China had its 3rd interest rate cut in 6 weeks, bringing back buyers as was the case in Europe.

Dow futures this AM in pre-trading were up 300 but were up only 250 just after trading started. Enthusiasm subsided, its now up 35. Advancers were ahead of decliners less than 3-1 & NAZ rose 9.

S&P 500 FINANCIALS INDEX rose 4, the Alerian MLP Index was up 3 & the Dow Jones REIT index was even. High yield (junk) bonds funds were up 1%, their kind of rally. The VIX, Volatility Index, dropped 2 to 68 on slightly easing fears in the markets.

The Libor (London interbank rate) for 3 month loans was down 23 basis points to 3.19% for the 14th consecutive daily drop. Lower rates are vital, they enable banks to feel better about lending to each other. The Fed agreed yesterday to provide swap lines of $30B to each of 4 central foreign banks aimed at containing a funding squeeze in emerging markets. Meanwhile the International Monetary Fund essentially doubled borrowing limits for emerging-market countries & waived demands for economic austerity measures.

•Money-Market Rates Drop as Fed Cut, Cash Infusions Start to Unlock Lending


Oil pulled back after the big gains yesterday while gold rose slightly:

CLZ08.NYM

Crude Oil Dec 08

....66.06 ET

.... 1.44 (2.1%)

GCX08.CMX

Gold Nov 08

....754.40 11:04am ET....

1.60 (0.2%)

• Oil rises to $68 on weak dollar, rate cuts- Reuters

Banks are having success working their way out of the credit mess with fairly coordinated help from central banks around the world. However, the economies are still struggling. GDP in the US shrank by 0.3% in Q3, less than feared but if shrinkage continues in Q4, that would make this period into an official recession.

•U.S. Economy Shrank 0.3% in the Third Quarter as Consumer Spending Dropped


Last week, new jobless claims were steady at 479K (above 400K is considered worrisome) but expectations were for a modest decline. The number collecting claims remains at 3.7MM up from 2.6MM last year, another signal about being in a recession.

• Jobless claims hold steady at elevated level- CNNMoney.com

Company news continues mixed but with a strong bias on disappointing side. Exxon Mobil (XOM), a Dow stock, reported record earnings resulting from record high oil prices. However, the stock is down 2.45 on expectations that recent lower oil prices will cost them. Royal Dutch Shell (RDS.A), the largest oil company in Europe, reported similar results, stock down 3.10. Cigna (CI), a leading insurer, reported disappointing earnings costing the stock 2.70. Motorola (MOT), now a $5 stock, reported an ugly Q3 loss along with plenty of other problems taking the stock down 30¢.

• Exxon Mobil posts biggest US quarterly profit ever- AP
• Cigna reports 53 percent drop in 3Q profit- AP
• Motorola posts $397M 3Q loss; postpones spinoff- AP

It's good to hear that central banks are making changes which will help banks get back into the lending business. However, macro economic stats keep coming & they aren't getting prettier. Autos & housing remain in their worst depression in 70 years & retail sales at stores are lousy. Tomorrow closes out a brutal Oct when the Dow will report a loss of about 2K as. It now looks like the US is caught up in an official recession.

Early gains in the Dow fade fast

Last night, Asian markets started off very weak. Tokyo was down to another 26 year low. However Hong Kong rose following the prior day which was the 2nd worst point loss day in its history. In their PM, stocks rose & Europe followed thru with strong gains. Encouraged by that performance, Dow futures were up 350 before the opening today. Dow rose to a gain for over 300 after the opening, but enthusiasm faded fast with gains reduced to only 120. Advancers were ahead of decliners 2-1, NAZ was up a meager 6 & the indices I follow were showing only minor changes.

Markets were encouraged by extreme oversold conditions bringing back bargain hunters looking at what was called the cheapest valuations in years. But macro economic conditions remain dismal. The Conference Board reported the index of consumer confidence fell to 38, its lowest level in 41 years & far below the expected number of 51.

•U.S. Consumer Confidence Drops to Record Low on Stock Slump, Credit Freeze


Oct is shaping up as the worst Oct in 70 years. And that follows what was probably the worst Sep in history. Month end statements will be mailed in a couple of weeks reminding those who don't use the internet about the awful beating they've endured. Nervous Nellie's may decide to cash out not to mention tax loss season is approaching which may have a significant effect on the markets this year:


Dow Jones Industrials --- 2 months




The chart shows 8K has been a line of support for a few weeks. However while writing this post, Dow dropped from up 120 to up only 59. Maybe that line in the sand will be tested today.

World markets sink but Dow is steady

Asian markets had another awful day. Their last 2 days of trading was probably the worst 2 day period ever. In the overnight, Tokyo, the largest market, dropped to yet another low. The ¥ rose to new heights at 93 to the dollar. Just a couple of months ago, it was down at 110. Their economy relies on exports, the strong ¥ makes their products harder to sell in a world economy that is sputtering. The Australian market sank again to another 4 year low. This message was repeated in about every Asian market.

• World markets slump; Nikkei at 26-year low- AP

However, one gained:

Seoul Composite

.....946.45

.... 7.70 ..up 0.8%

The Korean central bank reduced the lending rate by 75 basis points, helping the banking sector. European markets continued the worldwide stock market slide.

However, the US markets managed to digest this ugly news fairly well. The Dow dropped 150 at the opening, but recovered to around break even. The decliners are ahead of advancers 2-1 & NAZ dropped 14. S&P 500 FINANCIALS INDEX is essentially even, the Alerian MP index is down 3 while the Dow Jones REIT index tried to recover from new last week's low levels but slipped back to only break even. Oil dropped 1 after the production cut announced last weak was seen as less important than demand destruction.

• Oil falls below $63 as investors eye weak demand- AP

The $700B rescue package is working its way into the financials, banks are jumping on the band wagon. Insurance companies are looking for similar investments to help them. Plus additional companies, i.e. autos, now also see the gov as a lender/investor of last resort.

•Capital One, KeyCorp Among 12 Banks Receiving $28 Billion in U.S. Funding


The Commerce Dept announced sales of new homes rose 2.7% in Sep to an annual rate of 464K. Expectations were that sales would drop from the prior month. However, sales were still one-third below prior year's levels. These figures may be largely pre Sep 15 when the bailout package was in national headlines. Many businesses in the US reported that business dropped off a cliff following the negative headlines.

• New home sales rise 2.7 percent, prices at 4-year low- AP

There was some good news. Verizon, a Dow stock, had a favorable earnings report sending its stock up 10% (from depressed levels). They gave guidance for EPS to grow 8% this year which implies Q4 will be a little short of expectations by analysts. But they continue to invest for growth in the future.

• Verizon 3Q earnings up 31 percent- AP

Of the 20 most popular stocks at Charles Schwab, all are lower YTD with 13 down at least 30% each. As started in Korea, this week is expected to be a week of interest rate cuts around the world to help banks. The Federal Reserve is expected to cut 50, maybe 75, basis points. But the FED is running out of room for further rate cuts, negative rates just doesn't seem in the cards.

Bargain hunters bid up prices

Last night Asian markets sold off big time, following the lead of the US markets. The Tokyo market hit a 5 year low on negative sentiment plus the ¥ rose to the 97s (up from 110 to the dollar a few months ago). They are an export economy & their latest report showed net exports were close to even, not good for them. Hong Kong, Shanghai, Korean markets, etc. all are near multi year lows on fears about the global recession. Speaking of currencies, the € dropped to $1.28, lowest level in a couple years. The ¥ is seen as a safe haven currency while the € is not. Global trade is shifting dramatically which will impact US & foreign business.

Dow is up 102 & fading from higher levels today, advancers ahead of decliners only modestly & NAZ was about even. S&P 500 FINANCIALS INDEX is even, The Alerian MLP index & Dow Jones REIT index are little changed (resting a bit after big swings lately). The VIX (volatility index) is down 5 to "only" 64 in its heavenly world. Somebody pointed out that the VIX was higher than oil yesterday. Oil is up 2½ on talks of cutting back production while gold is down 28 to 705.

The markets are greatly oversold, once again. A relief rally is logical but so far there is no major conviction behind it. Bargain hunters are active but the breadth is not good, financials are still limping along & most importantly, lousy economic conditions keep dragging on.